No Recovery in Wages
In a genuine recovery, you’d expect wage growth to accompany stock market gains.
As revenues grow, companies can afford to pay their workers more without squeezing margins.
But that’s not how this recovery has worked.
Instead of moving higher together, wages and stock market returns have become decoupled.
Over the last six years, US stocks have risen an average of 20% a year. Wages have risen just 2% a year on average.
Overall workers’ pay is now at its lowest level relative to GDP since 1948… at the start of the postwar expansion.
In fact, stock market returns have been so strong in this recovery because wage growth has been weak. Companies have cut costs – and wages – to the bone. This has boosted profits at the expense of the average working stiff.
And the Fed’s treasured “wealth effect” from rising stock market portfolios has been limited to those at the top of the heap.
Fed data reveals that among those on the lowest rung of the ladder, less than one-third of families own stocks. At the top of the ladder, more than 9 in 10 Americans are invested in the stock market.
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